Poland, Spain Up in Arms Over Loss of Iraq Contract

The award of a major contract to equip the new Iraqi army has triggered an uproar in staunch U.S. allies Poland and Spain, where officials are questioning why their nations’ experienced arms firms lost out to an American company with little history in such projects.

The $327-million contract to supply everything from canteens to AK-47s was awarded in January to Nour USA, a Virginia-based company whose president is A. Huda Farouki. Farouki is a close friend of Ahmad Chalabi, a controversial member of the U.S.-appointed Iraqi Governing Council who has close ties with some Pentagon officials.

The winning bid was so much lower than those by the Polish and Spanish firms -- both for more than $500 million -- that officials from the two nations have questioned Nour USA’s ability to make good on the contract. Nour USA, formed in May, has no experience in supplying weapons, although it has supplied vehicles and communications equipment in Iraq.

“In this business, sometimes you win and sometimes you lose, but not by such a huge difference,” said Andrzej Spis, deputy chairman of Bumar Group, Poland’s state-owned military company whose $558-million bid was not accepted. Bumar has asked the U.S.-led Coalition Provisional Authority for an explanation of why it lost the bid, and board members are debating whether to file a formal protest.

Spanish officials were similarly stunned by the rejection of their bid. In an interview with local media, Spain’s secretary of state for defense, Fernando Diez Moreno, called the loss “incomprehensible.”

“There is a lot of bad feeling,” a Spanish government spokesman said.

But Farouki, of Nour USA, said Poland and Spain are just upset that, in spite of contributing soldiers and other resources to the U.S.-led occupation of Iraq, they didn’t win the contract.

“These are sour grapes,” said Farouki, a politically connected Washington financier. “They bid $200 or $300 million too much and they’re upset. They had a sense of entitlement.”

In making its successful bid, Nour USA enlisted several Polish and Iraqi partners. The Polish government has launched three investigations related to the award. One of them concerns Ostrowski Arms, part of the Nour USA consortium. Polish prosecutors are looking into whether Ostrowski may have violated any laws. Its owner, Andrzej Ostrowski, has no license to export arms.

In comments to Polish media, Ostrowski said he was only going to act in an advisory capacity and had no plans to export arms. He also said that his participation had the backing of Polish Ambassador-at-Large Slawomir Cytrycki, the Washington-based head of a special diplomatic mission supporting Polish companies attempting to acquire contracts.

Ostrowski did not respond to interview requests, but Cytrycki denied that he had ever vouched for Ostrowski. “We only supported Bumar,” Cytrycki said.

After losing the bid, Bumar officials said they were contacted by representatives from Nour USA, who solicited proposals to purchase arms and goods.

“We were very surprised that Nour was looking for the goods after the offer was closed,” said Anna Lukaszewska, a Bumar spokeswoman. “It’s impossible to win the offer and after that, start looking for the goods.”

Farouki confirmed that Nour USA had approached Bumar, but said dealings with them had broken down.

The controversy over the contract has generated headlines in Poland, whose military is now commanding 10,000 multinational troops in Iraq. Political leaders all but promised voters the country’s participation with the U.S. in Iraq would lead to contracts, and both President Aleksander Kwasniewski and Prime Minister Leszek Miller lobbied the Bush administration heavily in favor of Bumar.

Bumar’s loss of the contract has prompted at least one Polish lawmaker to call for a review of a recent, $3.5-billion deal that Poland inked to buy 48 F-16s from the U.S. firm Lockheed Martin.

Contract experts, while not commenting specifically on Nour USA’s bid, said an unusually low bid can sometimes be a sign of low-balling -- when a bidder submits a money-losing proposal to win the contract in the hopes of convincing the government to increase payments once the deal has been signed.

“People in the business, such as the Poles in this instance, usually can detect low-balling because they know the cost of performance,” said Charles Tiefer, a professor of government contracting at the University of Baltimore Law School. “Such allegations deserve very serious investigation.”

Farouki denied that he had engaged in low-balling, noting that procurement officers in the Coalition Provisional Authority had fully evaluated the background and experience of the companies involved in the consortium, known as DES Group.

Farouki said the CPA had awarded the contract based on Nour USA’s pricing and value and that the consortium was planning to supply arms and equipment from Ukrainian and Polish companies. He described Ostrowski and another Polish company as “advisors.” He said several members of the consortium had experience in arms dealing and the delivery of items “similar” to the vehicles and uniforms required by the contract.

“We know what we’re doing,” Farouki said. “The prices submitted were the best possible prices. We did not want to high-ball. We did not want to gouge.”

Farouki also dismissed suggestions that his friendship with Chalabi had anything to do with the award. Farouki said he was a “personal friend” of Chalabi. He added that a company in which he was a part owner had once borrowed money from a U.S.-based subsidiary of Petra Bank in Jordan, which collapsed in 1989 when Chalabi was its president. The loan was repaid. Chalabi was convicted of bank fraud in 1992 in connection with the collapse and fled Jordan.

Farouki noted that the contract was awarded in an open bidding contest with 18 other companies.

“There’s absolutely no commercial or business relationship between Ahmad Chalabi and Nour USA, or with me personally,” Farouki said.

There are also questions about the partners behind Nour USA. For instance, on its website Nour has listed as a “partner” Faisal Sadoun, an Iraqi-Jordanian entrepreneur whose family fled Iraq after the 1958 coup that brought the Baath Party to power. Sadoun, however, said he was not a partner in Nour USA.

“I am not involved in any way,” said Sadoun, though he acknowledged that he had worked with Nour USA in winning an oil-field security contract last year.

Farouki acknowledged that Sadoun had never been a partner in Nour USA, attributing the listing to confusion over the oil-security contract. By Monday evening, the listing on the website had been taken down.

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Times special correspondent Ela Kasprzycka in Warsaw contributed to this report.